Investing - Theory, News & General • Dividends equated with “forced sales”

Oh, i didnt realize you were a sysadmin. That explains everything!

You would just have been one on the countless billionaire sysadmins that easily identified these companies that wall street missed.

My mistake. Carry on with the magical money discussion.

While I can't confirm the OP's assertions, I'm not ready to claim that it's impossible for someone working in an environment with early exposure to cutting-edge technologies to have some insights about which up-and-coming companies might do well. It probably happens sometimes. Your comment is just an opinion.

Also, the only thing "magical" here is the propensity to imagine that someone made a claim about "magical money" when nobody did.

Now, dividends have exactly the same cash flows, accounting, and investment impact as a stock buyback. Except, unlike a buyback, one doesn’t have the option to decline- one must accept.

Buybacks at overvalued levels destroy shareholder value (as Buffett pointed out).

I don’t buy that dividends are a forced sale. The company is distributing profits. Why? Maybe they believe they are in a productive industry where they don’t believe they can use the money to grow.

For some reason dividend discussions always get strange. If you own equities, you are going to get dividends. What’s the big deal?

The above observations are reasonable. In a free market, nobody is forced to do anything with their investment dollars.

Maybe people like to use hyperboles like "forced" (and "magic money", and "irrelevance") because it sounds more dramatic, and therefore draws attention (like clickbait). But it's just a semantic device, and since it's a hyperbole, it means it isn't really true.

I am indeed forced to buy dividend stocks. Most funds pay dividends. I can’t choose a version of VTI that doesn’t pay dividends. I am forced to accept dividends if I want the total market.

You're not being forced to do anything. You said you "want the total market". That means you want everything that's in it. Or maybe you don't know if you want everything in it. It's almost as if you said "I want to buy an entire zoo but I don't want monkeys, they're forcing me to buy monkeys". In that case, you don't really want an entire zoo.

End of year both stocks double
You have
10 shares * 8 dollars + 10 dollar dividend = 90 dollars

I have
8 shares * 10 dollars + 10 dollars (sold stock) = 90 dollars.

This reasoning only works if market valuations stay constant. Which they don't.

The math in the above is easier to follow than in your original example. Your criticism of it ("only works if market valuations stay constant") doesn't seem applicable, because learntoinvest123's example doesn't say that market valuations remain constant (rather, it says they went down a lot, and then went up a lot, just like in your example). Can you say more specifically what you disagree with in learntoinvest123's math?

I'm not saying I have any opinion about your SORR claim. Maybe there's something there. I'm just not prepared to comment on it until I understand your thoughts on the above a little better.

Statistics: Posted by HanSolo — Sat Jul 13, 2024 4:04 am — Replies 123 — Views 3957

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